A METHOD FOR SYSTEMIC RISK ESTIMATION BASED ON CDS INDICES
A METHOD FOR SYSTEMIC RISK ESTIMATION BASED ON CDS INDICES
Author(s): Gabriel GAIDUCHEVICISubject(s): Methodology and research technology
Published by: Editura Universităţii »Alexandru Ioan Cuza« din Iaşi
Keywords: Copula; CDS; tail dependence; systemic risk;
Summary/Abstract: The copula-GARCH approach provides a flexible and versatile method for modeling multivariate time series. In this study we focus on describing the credit risk dependence pattern between real and financial sectors as it is described by two representative iTraxx indices. Multi-stage estimation is used for parametric ARMA-GARCH-copula models. We derive critical values for the parameter estimates using asymptotic, bootstrap and copula sampling methods. The results obtained indicate a positive symmetric dependence structure with statistically significant tail dependence coefficients. Goodness-of-Fit tests indicate which model provides the best fit to data.
Journal: Review of Economic and Business Studies (REBS)
- Issue Year: 2015
- Issue No: 15
- Page Range: 103-124
- Page Count: 22
- Language: English
